The Shekel Drops / The Fallacy of the Middle Class Protest

The tent dwellers achieve nothing if they just demand 'more.' Arabs and Haredim must become an economic force.

Only 50% of Israelis pay taxes. This is the warped reality of the country. The sixth percentile pays 2.4% of all direct taxes. The seventh percentile pays 4.2%, the eighth percentile pays 8.1%, the ninth pays 17.1% and the tenth - the richest 10% - pay 65% of all direct tax.

Yes, 10% of the population pays 65% of the direct tax.

housing protest - AFP - 30.7.11

In recent weeks, TheMarker has published a number of articles calling for greater tax equality: Make the rich pay more, especially through corporate tax, social security provisions by companies, capital gains tax and the like, to ease - if only slightly - the tax burden of the middle class.

But make no mistake: When only 50% of the people pay any tax at all, and the 10% that earn the most (people grossing more than NIS 19,000 a month and up ) pay 65% of the bill, salvation will not come by tweaking tax rates. The rich could be taxed more and thereby increase the state's revenue from tax; but that won't save the people of Israel, and certainly not the middle class.

Nothing can save the middle class as long as it alone, with a handful of rich, bear the entire burden.

Nor will the tents protest save the middle class, as long as their demands focus on increasing payment to the middle class through tax cuts or lower housing prices. The middle class is tired of being the national beast of burden, doing the army service and paying the tax. The middle class is also tired of helplessly watching other communities grab at the common kitty, gouging themselves ever-larger pieces of the shrunken national pie - Haredim, settlers, workers of the Israel Electric Corporation and the ports, the giant companies that crush competition and prevent prices from dropping. They're tired of the rich paying mere pittances in tax.

The middle class is right. But becoming just another sector making a clamor and demanding that it get paid more, at the expense of others, is ludicrous. The middle class is the nation; any bill that it serves to the nation, is being served to itself. Remember, nobody pays anything here aside from the middle class.

In fact, there is a danger in the tents protest: If anything, it could exacerbate polarization of society. Furthermore, meeting its demands could ruin our children's future.

Athens on the Yarkon

The easiest thing politically that Prime Minister Benjamin Netanyahu could do, to survive the tents movement, is to meet its demand - pay everybody (because that's what the people want ) at the expense of breaking the budget, increasing the deficit and piling up debt.

But debt must be paid - and it will start to come due when, in five years, Israel finds itself exactly where Greece is now. This is definitely not in the middle class's best interest.

The protest is pointless unless it focuses its demands on the underlying, fundamental ills that gave birth to it - the narrow-based pyramid that is Israel, in which only 50% pay tax (and serve in the reserves ).

Until the State of Israel broadens the base of citizens who work and pay tax, the state of the middle class cannot improve. Simple, because there will be nobody else to share the burden. It will continue to bear the tax burden alone, plus the welfare payouts to the other 50% who don't work.

Let us call it by name: The Haredim and Arabs, two problems that the State of Israel has swept under the rug for decades. Some 20% of Israelis are Arabs, but the state ignores their existence. The middle class should ask itself when the last time was they chatted with an Arab, and not while eating at a local hummus joint. Or when his child last played with an Arab child. Arabs are isolated from society and the economy, as though they don't exist.

But they do, and the state would do well to recognize them. It is high time to stop prejudicial treatment of Arabs and to fully integrate them into society and the economy; and to demand too that the Arabs handle their own onerous internal problems, mainly in respect to tax dodging and rotten local government.

The state also sweeps the Haredim under the rug, but in the opposite way to the Arabs: It capitulates to their every demand, allowing them to subsist in the misery of poverty and unemployment at the expense of the state. The threefold consequent burden - they don't serve in the army, won't work and live on welfare or support for yeshivas - is intolerable, morally and economically. The tents protest is the first sign that the back of the middle class camel has broken under this burden.

This is where the tent-dwellers should aim their arrows: They should remind government that the middle class is still the majority and that it can't keep financing people who choose to live in poverty. We should return to David Ben-Gurion's arrangement of quotas for people studying Torah at the state's expense. The other Haredim should kindly go to national service and then work. We might also mention that a modern, equitable, Zionist democracy must not forgo education: The state should stop funding the isolationist Haredi education system. The same goes for isolationist Arab schools.

If the tent-dwellers really want to assure the future of the middle class, their call must be for equal sharing of the burden. The rich must pay more tax; the poor must work more and receive less welfare. Anything else merely perpetuates the constant erosion of the middle class caught between the rich and the poor.